Netflix profits up 56% as original content splurge pays off

A year ago Netflix added more than 130 countries to its service. On Wednesday, it announced a 56 per cent rise on profits and a global customer base of 93.8 million people.

Netflix added a record 7.05 million new customers in the three months to December 31, 2016, beating its forecast of 5.2 million for the quarter. The split between international and US members is also narrowing (Netflix added 5.1 million in the quarter) bringing the total to 44.4 million – or more than 47 per cent of its total membership.

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A lot of that success is down to investments in original programming. Netflix spent $5 billion (£4 billion) in 2016 on shows such as The Crown, Luke Cage and Stranger Things. It produced 600 hours of original programming in 2016, which it says will increase to 1,000 in 2017. Budgets for original shows will be increased to $6 billion to cope with the extra demand, Netflix said.

Annual revenue in 2016 was $8.83 billion with a profit of $186.7 million. Quarterly profits were up 56 per cent year-on-year to $67m. The better-than-expected results sent Netflix’s share up eight per cent in after-hours trading.

Netflix also debuted the trailer for another exclusive film, The Discovery, starring Rooney Mara and Jason Segel, available from March 31. Comedian Jerry Seinfeld, meanwhile, has signed an exclusive multi-show production deal with Netflix.

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After a strong 2016, Netflix expects something of a slowdown over the coming year. It forecasts adding 5.2 million customers in the current quarter, (1.5 million in the US, 3.7 million elsewhere). That slowdown, it said, was a result of it launching in 130 new countries in 2016, making year-on-year comparisons tough.

As Netflix's success continues, it sees more companies lining up to compete for the streaming market. “It’s becoming an internet TV world," Netflix wrote in a letter to shareholders (PDF). And, slowly but surely, Netflix’s linear TV rivals are making their moves. "The BBC has become the first major linear network to announce plans to go binge-first with new seasons, favouring internet over linear viewers," Netflix wrote. And HBO, it added, was presumably not far behind.

That’s potentially big news in the US, where HBO rivals Netflix with HBO Now and HBO Go (in the UK, Sky has the rights to HBO shows). But HBO dropping whole seasons of Game of Thrones and Westworld at once would add significantly to the binge-watching trend.